March 7, 2017 / 8:35 AM / 10 months ago

Daily Briefing: Weak start for German industry

LONDON (Reuters) - German industrial orders were pretty awful for January, down 7.4 percent in what is the biggest monthly slump in the figure for eight years.

A worker controls a tapping of a blast furnace at Europe's largest steel factory of Germany's industrial conglomerate ThyssenKrupp AG in Duisburg, Germany December 6, 2012. REUTERS/Ina Fassbender/File Photo

Moreover the explanation - a sharp fall in domestic and euro zone demand - goes counter to the otherwise fairly buoyant readings on the region’s economy as a whole. The Economy Ministry argues the heavy demand towards the end of last year sucked some of the momentum out of January’s figures and that they will rebound later in the year.

The British parliament's upper house will today try to force the government to give lawmakers a greater say over the terms of Britain's exit from the European Union and final approval of an eventual deal with the bloc.

The government is set to lose the vote in the House of Lords on the wording of legislation giving Prime Minister Theresa May the right to trigger Brexit talks, but ministers are determined to overturn any changes before they become law. The debate starts at 1100 GMT with the main vote due early evening.

Have France's conservatives finally decided to stick with Francois Fillon as their presidential candidate? That was the word out of the meeting of party leaders last night. Fillon was adamant at the weekend that he was not going to step down and, under party rules, no one could force him to. The fact that Alain Juppe ruled himself out means, for now at least, there is no obvious alternative. Fillon resumes his campaign in the city of Orleans today.

The heads of four big western powers in Europe -- France, Germany, Italy and Spain -- have seen the future of the EU and it is "multi-speed". That means that EU members should be able to pursue integration at the speed they want, picking and choosing from which projects they take part in and which they don't.

A Europe of different speeds is necessary, otherwise we will probably get stuck, Germany’s Angela Merkel said. The problem is that such an arrangement is much less welcome among eastern European states who fear it could lead to an EU in which some members are more equal than others. This sets the stage for interesting discussions at Thursday’s EU summit.


Some slippage in Wall Street stocks overnight has failed to ripple through world markets, which appear to be struggling for some direction this week despite the plethora of political and policy influences. Given the big drop in cross-asset correlations this year, which many put down to Fed tightening and ‘post peak QE’ at the other central banks, then we should probably brace for more idiosyncratic market moves over the year ahead with another Fed hike now nailed on for next week and the ECB this week possibly making noises about its ongoing ‘dovish taper’.

U.S. President Donald Trump’s mounting domestic difficulties and distractions, meantime, were cited as one factor for softer equity markets late Monday. But if there’s any delay in his economic and trade proposals as a result, then perhaps that’s not unambiguously bad for overseas and emerging markets. And even though the S&P500 slipped about 0.3 percent, the ViX implied volatility gauge remains extremely low at just above 11 percent.

Asia bourses have been firmer on balance as a result, with Shanghai, Hong Kong and Seoul all up smartly in a big week for Chinese economic data. Chinese February FX reserves are due out today, with monthly trade numbers hitting the screens tomorrow.

European stock markets are due to open higher too, with this week’s mix of M&A and earnings outweighing the hit from news of Deutsche Bank’s cash call on Monday. The outsize and surprising 7.4 percent drop in German industrial orders for January, the biggest for eight years, has had no obvious immediate effect. The European political picture remains largely unchanged, with France's centre right Republican candidate for president Francois Fillon’s decision on Monday to fight on leaving opinion polls favouring a sizeable win for centrist Emmanuel Macron. The French-German 10-year bond spread widened a touch on Monday and was back at last Thursday’s levels, but is hovering just above 60 basis points this morning.

US Treasury yields, the dollar and Brent crude are all steady to firmer. Sterling is on the back foot this week ahead of the UK budget speech and amid Brexit worries emanating from the upper house of parliament’s review of the Brexit bill and fallout from last week’s Northern Irish assembly elections.     

editing by John Stonestreet

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